What happened
The federal government is preparing to let a broad set of tax exemptions expire on 30 June 2026, in a move officials say is intended to raise revenue, widen the tax net and end what they call preferential treatment for selected sectors and regions.
Under the plan reported on 1 June 2026, relief measures due to lapse at the end of the current fiscal year are not expected to be extended into FY2026-27, meaning individuals, businesses and industries that currently pay reduced or no tax would move onto the standard system from 1 July 2026.
One of the largest changes concerns the former tribal districts of Khyber Pakhtunkhwa. The income tax exemption available to individuals, companies and associations of persons there is expected to end after 30 June 2026, and the exemption from withholding tax in the same areas is also likely to lapse, subjecting them to normal deductions and collections.
The gradual withdrawal of sales tax concessions for industries in the erstwhile FATA and PATA regions would continue. Sales tax on imports and supplies by industrial units in those areas is set to rise from 10 per cent to 12 per cent between July 2026 and June 2027, and imports of plant, machinery, equipment and industrial raw materials for installation there would also face the 12 per cent rate.
Why it matters
The electric vehicle sector faces some of the sharpest changes. Several incentives are set to expire on 30 June 2026, including sales tax exemptions on completely knocked-down kits for locally assembled electric cars, SUVs with battery capacity up to 50 kWh and light commercial vehicles with batteries up to 150 kWh. The reduced 1 per cent sales tax on locally manufactured or assembled electric vehicles in those categories is also expected to end, and concessions for hybrid vehicles, where rates now range from 8.5 per cent to 12.75 per cent, may lapse unless renewed.
Other measures nearing expiry include the sales tax exemption on electricity supplied to residential and commercial consumers in the former tribal areas and the exemption on supplies of locally manufactured silos. Officials described the withdrawals as part of a wider effort to simplify the tax system and remove distortions that had allowed tax-free goods to be sold outside the intended regions. For consumers, the changes could mean higher costs where businesses pass on the extra tax, adding to the burden already being debated ahead of the budget, as noted in this preview of the salaried tax relief debate.
The moves come as the government works to meet revenue targets agreed with the International Monetary Fund. The federal budget for 2026-27 was expected to be presented later that week.
Sources & reporting notes
This is a summary of published reporting, not independent reporting. Figures and details are as carried by the cited outlet. Sources reviewed on 2026-06-01.
- ProPakistani — "Consumers, Businesses Brace for Impact as Govt Moves to Scrap Tax Exemptions in Budget"1 June 2026 · Reports the exemptions due to expire on 30 June 2026 and the sectors affected.
